In the spirit of better late than never, I am responding to Duncan’s nudge to funders with a few thoughts I have been kicking around since April.

Here is the punch line. For foreign funders, supporting think tanks better includes supporting them with flexible core support and paying for the full cost of achieving the impact they hope to have. Some of you funders might say, “I can’t do that” and stop reading. But even if you don’t have the right funding instrument to offer completely flexible core support, you are not off the hook. There are ways to bring the spirit of core support to other funding approaches. No excuses.

Let’s agree on a few things up front. First is that funders rarely fund policy research to sit on a shelf. They fund it because they perceive it as an important part of informing change. Second is that no one can predict precisely how the policy process will play out (least of all funders, who are often thousands of miles away), so anyone trying to influence it needs to be responsible, flexible and adaptive. So how can foreign funders maximize flexibility even with more restrictive funding tools? Let’s consider two questions.

What makes core funding so valuable?

Core funding is so valuable because it allows for flexibility, ownership, independence and institutional strengthening. To make the most of think tankers’ intellect, position and political savvy to inform policy, they need to pursue a research agenda that aligns with national priorities and political windows, rather than donor’s own interests. Core support allows institutions to invest in the very things that make them credible and influential, and incidentally, attractive to funders – strong leadership, highly-qualified scholars, strategic partnerships, convening power, research quality and ethics practices, communications and outreach capacity, and to do so over a useful time horizon that is not bound by a given project.

If funders offer project support focused on the research product alone, they are freeriding on these institutional strengths, and may even risk weakening them. Core funding allows for a greater degree of intellectual independence, reducing the risk that think tanks are accused of producing research findings that favor funders’ interests. Core support also reduces transaction costs, especially if a funder has multiple project grants to the same institution. (I recently learned from a fellow funder that they have over 10 project grants to the same policy research center! Can you imagine the saved time on both sides if this were rolled into a core support grant?)

How can we bring the value of core support to other ways of funding?

Despite the many values of core funding, a recent study, “Think Tank Funding in Developing Countries: Status and Outlook,” indicates that project funding remains the dominant approach to funding think tanks. North/South collaborative research, in which funding goes to think tanks or research councils in Europe or the U.S. with the expectation that they’ll partner with think tanks in the Global South, are an increasingly popular approach for governments that want to spend more of their aid dollars at home. See the UK Global Challenges Research Fund that explicitly aims “to ensure that UK research takes a leading role in addressing the problems faced by developing countries.”

So, if funders are stuck with more restrictive forms of support, how can they use them more in the spirit of core support? Here are a few tips:

Fund for outcomes or mission rather than outputs. Rather than funding discrete research projects, donors can work with grantees to identify the influence they hope to have, and fund a broader set of activities, including research, outreach, convening, partnerships, communications, etc. that contribute to this change. For funders, the key is to not be too prescriptive, leaving it to the think tank to determine the right mix of activities based on the evolving context. For think tanks, the key is to start thinking less about your outputs, and more about your positioning and ability to influence. (Lots more thoughts on this in my 6 ways think tanks can overcome angst about impact piece.)

Fund full costs. If funders pay less than what it takes an organization to do the work, it drains the institutional strength that attracted the funder in the first place. This happens all the time, partly by squeezing the overhead line in budgets. Thanks to recent momentum around funding full costs and efforts to bust the overhead myth and overhead fiction, some U.S. funders are starting to step away from the obsession of low overheads as a sign of efficiency.

Indeed, as the authors of “Pay What It Takes” argue, “Funders taking a pay-what-it-takes approach are sending a powerful message, ‘We want to solve society’s biggest problems and recognize that we must build strong, effective organizations to do so not just contract for projects and services.’” For think tanks, the key is to understand the true costs of your work, and build a budget accordingly. This is not as easy as it sounds. My colleague Daniel Stid points his grantees to the Non-Profit Cost Analysis Toolkit for figuring out the true costs of the work they are proposing to do (I should do that too!). Think tanks might also learn lessons from the health research community, including “Five Keys for Improving Research Costing in Low and Middle Income Countries.”

Get creative. Can you create a budget line that signals flexibility, such as “policy response capacity,” or “opportunities,” or just “contingency?” One Eastern European research funder is stuck with project grants, but uses them to support operational aspects of research organizations. An enlightened few are able to fund reserves or endowments. As the authors of “Why Funding Overhead is Not the Real Issue” argue, “We’ve been so distracted by the discussion of whether nonprofits should just be able to pay their day-to-day operating expenses (and how)—including overhead—that we’ve mostly ignored the need for nonprofits to generate enough surplus to reinvest in the organization’s immediate and future health.” (These same authors make the experience of budget micromanagement visceral by inviting us to imagine a line-item paycheck. Shudder.)

Maybe you can coordinate with other funders of the same institution and agree (with the grantee, of course) on what you are hoping to achieve. Maybe you can contribute a flexible basket fund, or at least a programmatic body of work rather than a single project. Maybe you can make your standard project grant three years instead of two, to offer a bit more security for staffing.

I am not quite ready to give up the fight for more core support for great think tanks. But in the meantime, let’s at least take the “do no harm” approach, and make the most of the tools we have to give policy-relevant research a better chance of actually informing policy, and policy research organizations a chance to thrive as institutions.

Since Duncan Green nudged me to action with a challenge, let me end with one of my own. Some American foundations are admitting their sins of over-zealous focus on low overheads as a measure of efficiency. Some are repenting with more flexible core support, raising their limit on overhead or indirect costs, and funding for outcomes rather than micromanaging for outputs. To other foundations, bilateral, multilateral and emerging economy donors — what have been your sins, and how are you overcoming them?

To think tanks – what are you doing to understand the true costs of your work and advocate for funders covering them? Let’s get the conversation going.

Many of the ideas here were developed together with members of a breakout group at the April TTI event: Julie Brittain, Deryck Brown, Tausi Kida, Samar Verma, Mark Lewis, Sandhya Venkateswaran, Diakalia Sanogo, Masa Djordjevic, Natalie Nicholles and Annica Wayman.